Negative equity is the term commonly used to describe the situation of having a home that is worth less than your actual mortgage, or all the borrowings secured against your home.

There is no easy solution to the problem of negative equity, however negative equity does not automatically mean that your home will be repossessed if you fall into arrears.

Your lender is likely to be a bit more cautious about options available for repayment of arrears and you may not be able to sell your home without making a loss, but you should still be given a reasonable chance to repay your arrears and take advantage of any available benefit or government scheme.

If you feel that your lender is not treating you fairly and is not making reasonable attempts to arrange a payment plan with you, you should consider checking whether the lender is conforming to the pre-action protocol. All lenders should comply with this.

You should seek specialist advice if you are in negative equity, as some options may have a less favourable outcome for you than others.

For example, handing in the keys to your lender (sometimes called ‘voluntary surrender’) would still leave you in debt because negative equity basically means that your house is now worth less than what you bought it for.

Also, remortgaging may not be an option for you because there will be no equity in the house in your possession. If you are in arrears and are facing negative equity, you should speak to a specialist debt adviser with an organisation such as the Housing Rights Service.